Non-Farm Payroll – 05 July 2021

Thursday was a day marked by positive sentiment on equity markets (yet another record high on Wall Street), amid a return to cyclical stocks on the back of good macro data. Nonfarm unemployment claims fell to their lowest level since the start of the pandemic, raising expectations for labour market data (June new jobs, wages and unemployment) due out today.
Although the manufacturing ISM remained at sustained levels, the employment component returned below 50 for the first time since November. The economy has recorded difficulties in the hiring process while the prices paid component returned to increase, rising to its highest in more than 40 years.
Nonfarm payrolls in the US have added 850K jobs in June, which is the strongest job growth in 3 months. Led by the entertainment and hospitality sector as companies look to expand production and services to meet growing demand. This nonfarm employment levels would leave total employment at 6.9 million jobs short of its peak in February 2020.
Nevertheless, labour shortages continue to weigh on capacity production. This because many companies struggle to hire employees, as increased unemployment benefits, ongoing childcare responsibilities and health concerns may dissuade some workers from taking jobs. To deal with the lack of workers, firms are increasing wages and benefits.
After a 0.5% gain in May, average hourly earnings rose 0.4% month on month pushing the annual rate to 3.7% from 2.1%. That would also refresh concerns about inflationary pressures, even though the Federal Reserve has consistently insisted that price increases are temporary.
The Nonfarm payroll figure for June 202 (850K) are below a downwardly revised 886K in May, but higher than the 600K forecast. The services sector opened 624K jobs led by leisure and hospitality (332K), financial activities (10K) and education and health (123K). there has been a growth also in trade, transportation and utilities (62K), professionals and businesses (53K) and financial activities (10K), while the information sector lost 4K jobs. The manufacturing sector added 68K jobs, driven by growth in construction (47K), construction (19K) and natural resources and mining (2K). Nela Richardson, chief economist said that “While payrolls are still nearly 7M short of pre-COVID19 levels, job gains have totalled about 3M since the start of 2021. Service providers, the hardest hit sector, continue to do the heavy lifting, with leisure and hospitality recording the strongest gains as businesses begin to reopen at full capacity across the country,”
After the Nonfarm payroll data,market reaction has sparked new highs on equities with the S&P500 rising above 4330 points +0.30%. Feared inflationary pressures on wages have been probably read as still too low and decreasing with regard to expected figures to cloud the current scenario.